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Retirement Plans and Other Benefits
 12 Months Ended
Jan. 31, 2015
Compensation and Retirement Disclosure [Abstract]  
Retirement Plans and Other Benefits

20.  Retirement Plans and Other Benefits

Pension and Other Postretirement Plans

The Company has defined benefit pension plans covering certain of its North American employees, which are funded in accordance with the provisions of the laws where the plans are in effect. In addition, the Company has a defined benefit plan for certain individuals of Runners Point Group. The Company also sponsors postretirement medical and life insurance plans, which are available to most of its retired U.S. employees. These plans are contributory and are not funded. The measurement date of the assets and liabilities is the last day of the fiscal year.
The following tables set forth the plans’ changes in benefit obligations and plan assets, funded status, and amounts recognized in the Consolidated Balance Sheets, measured at January 31, 2015 and February 1, 2014:
 
 
 
 
 
 
 
Pension Benefits
 
Postretirement Benefits
  
 
2014
 
2013
 
2014
 
2013
  
 
(in millions)
Change in benefit obligation
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Benefit obligation at beginning of year
 
$
674
 
 
$
706
 
 
$
15
 
 
$
15
 
Service cost
 
 
15
 
 
 
14
 
 
 
—
 
 
 
—
 
Interest cost
 
 
28
 
 
 
25
 
 
 
1
 
 
 
1
 
Plan participants’ contributions
 
 
—
 
 
 
—
 
 
 
2
 
 
 
2
 
Actuarial (gain) loss
 
 
67
 
 
 
(11
) 
 
 
4
 
 
 
—
 
Foreign currency translation adjustments
 
 
(9
) 
 
 
(9
) 
 
 
—
 
 
 
—
 
Runners Point Group acquisition
 
 
—
 
 
 
1
 
 
 
—
 
 
 
—
 
Benefits paid
 
 
(53
) 
 
 
(52
) 
 
 
(3
) 
 
 
(3
) 
Benefit obligation at end of year
 
$
722
 
 
$
674
 
 
$
19
 
 
$
15
 
Change in plan assets
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Fair value of plan assets at beginning of year
 
$
650
 
 
$
673
 
 
 
  
 
 
 
  
 
Actual return on plan assets
 
 
90
 
 
 
33
 
 
 
  
 
 
 
  
 
Employer contributions
 
 
9
 
 
 
5
 
 
 
  
 
 
 
  
 
Foreign currency translation adjustments
 
 
(10
) 
 
 
(9
) 
 
 
  
 
 
 
  
 
Benefits paid
 
 
(53
) 
 
 
(52
) 
 
 
  
 
 
 
  
 
Fair value of plan assets at end of year
 
$
686
 
 
$
650
 
 
 
  
 
 
 
     
 
 
 
 
 
 
 
 
Pension Benefits
 
Postretirement Benefits
  
 
2014
 
2013
 
2014
 
2013
  
 
(in millions)
Funded status
 
$
(36
) 
 
$
(24
) 
 
$
(19
) 
 
$
(15
) 
Amounts recognized on the balance sheet:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Other assets
 
$
13
 
 
$
4
 
 
$
—
 
 
$
—
 
Accrued and other liabilities
 
 
(3
) 
 
 
(3
) 
 
 
(1
) 
 
 
(1
) 
Other liabilities
 
 
(46
) 
 
 
(25
) 
 
 
(18
) 
 
 
(14
) 
  
 
$
(36
) 
 
$
(24
) 
 
$
(19
) 
 
$
(15
) 
Amounts recognized in accumulated other comprehensive loss, pre-tax:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Net loss (gain)
 
$
394
 
 
$
399
 
 
$
(6
) 
 
$
(13
) 
Prior service cost
 
 
1
 
 
 
1
 
 
 
—
 
 
 
—
 
  
 
$
395
 
 
$
400
 
 
$
(6
) 
 
$
(13
) 
As of January 31, 2015 and February 1, 2014, the Canadian qualified pension plan’s assets exceeded its accumulated benefit obligation. Information for those pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
 
 
 
 
 
2014
 
2013
  
 
(in millions)
Projected benefit obligation
 
$
662
 
 
$
603
 
Accumulated benefit obligation
 
 
662
 
 
 
603
 
Fair value of plan assets
 
 
613
 
 
 
575
 
The following tables set forth the changes in accumulated other comprehensive loss (pre-tax) at January 31, 2015:
 
 
 
 
 
Pension
Benefits
 
Postretirement
Benefits
  
 
(in millions)
Net actuarial loss (gain) at beginning of year
 
$
399
 
 
$
(13
) 
Amortization of net (loss) gain
 
 
(15
) 
 
 
3
 
Loss arising during the year
 
 
15
 
 
 
4
 
Foreign currency fluctuations
 
 
(5
) 
 
 
—
 
Net actuarial loss (gain) at end of year(1)
 
$
394
 
 
$
(6
) 
Net prior service cost at end of year(1)
 
 
1
 
 
 
—
 
Total amount recognized
 
$
395
 
 
$
(6
) 
(1)
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost (income) during the next year are approximately $14 million and $(2) million related to the pension and postretirement plans, respectively. The net prior service cost did not change during the year.
The following weighted-average assumptions were used to determine the benefit obligations under the plans:
 
 
 
 
 
 
 
Pension Benefits
 
Postretirement Benefits
  
 
2014
 
2013
 
2014
 
2013
Discount rate
 
 
3.43
% 
 
 
4.32
% 
 
 
3.40
% 
 
 
4.20
% 
Rate of compensation increase
 
 
3.67
% 
 
 
3.69
% 
 
 
  
 
 
 
  
 
Pension expense is actuarially calculated annually based on data available at the beginning of each year. The expected return on plan assets is determined by multiplying the expected long-term rate of return on assets by the market-related value of plan assets for the U.S. qualified pension plan and market value for the Canadian qualified pension plan. The market-related value of plan assets is a calculated value that recognizes investment gains and losses in fair value related to equities over three or five years, depending on which computation results in a market-related value closer to market value. Market-related value for the U.S. qualified plan was $557 million and $579 million for 2014 and 2013, respectively.
Assumptions used in the calculation of net benefit cost include the discount rate selected and disclosed at the end of the previous year as well as other assumptions detailed in the table below:
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Postretirement Benefits
  
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Discount rate
 
 
4.33
% 
 
 
3.79
% 
 
 
4.16
% 
 
 
4.20
% 
 
 
3.70
% 
 
 
4.00
% 
Rate of compensation increase
 
 
3.67
% 
 
 
3.69
% 
 
 
3.68
% 
 
 
  
 
 
 
  
 
 
 
  
 
Expected long-term rate of return on assets
 
 
6.25
% 
 
 
6.24
% 
 
 
6.63
% 
 
 
  
 
 
 
  
 
 
 
  
 
The expected long-term rate of return on invested plan assets is based on the plans’ weighted-average target asset allocation, as well as historical and future expected performance of those assets. The target asset allocation is selected to obtain an investment return that is sufficient to cover the expected benefit payments and to reduce future contributions by the Company.
The components of net benefit expense (income) are:
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Postretirement Benefits
  
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
  
 
(in millions)
Service cost
 
$
15
 
 
$
14
 
 
$
13
 
 
$
 —
 
 
$
 —
 
 
$
 —
 
Interest cost
 
 
28
 
 
 
25
 
 
 
28
 
 
 
1
 
 
 
1
 
 
 
—
 
Expected return on plan assets
 
 
(38
) 
 
 
(39
) 
 
 
(40
) 
 
 
—
 
 
 
—
 
 
 
—
 
Amortization of prior service cost
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
Amortization of net loss (gain)
 
 
15
 
 
 
17
 
 
 
17
 
 
 
(3
) 
 
 
(3
) 
 
 
(4
) 
Net benefit expense (income)
 
$
20
 
 
$
17
 
 
$
18
 
 
$
(2
) 
 
$
(2
) 
 
$
(4
) 
Beginning with 2001, new retirees were charged the expected full cost of the medical plan and then-existing retirees will incur 100 percent of the expected future increases in medical plan costs. Any changes in the health care cost trend rates assumed would not affect the accumulated benefit obligation or net benefit income, since retirees will incur 100 percent of such expected future increase.
The Company maintains a Supplemental Executive Retirement Plan (“SERP”), which is an unfunded plan that includes provisions for the continuation of medical and dental insurance benefits to certain executive officers and other key employees of the Company (“SERP Medical Plan”). The SERP Medical Plan’s accumulated projected benefit obligation at January 31, 2015 was approximately $15 million.
The following initial and ultimate cost trend rate assumptions were used to determine the benefit obligations under the SERP Medical Plan:
 
 
 
 
 
 
 
 
 
Medical Trend Rate
 
Dental Trend Rate
  
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Initial cost trend rate
 
 
7.00
% 
 
 
7.00
% 
 
 
7.50
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
Ultimate cost trend rate
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
Year that the ultimate cost trend rate is reached
 
 
2019
 
 
 
2018
 
 
 
2018
 
 
 
2013
 
 
 
2013
 
 
 
2013
 
The following initial and ultimate cost trend rate assumptions were used to determine the net periodic cost under the SERP Medical Plan:
 
 
 
 
 
 
 
 
 
Medical Trend Rate
 
Dental Trend Rate
  
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
Initial cost trend rate
 
 
7.00
% 
 
 
7.50
% 
 
 
8.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.50
% 
Ultimate cost trend rate
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
 
 
5.00
% 
Year that the ultimate cost trend rate is reached
 
 
2018
 
 
 
2018
 
 
 
2018
 
 
 
2013
 
 
 
2013
 
 
 
2013
 
A one percentage-point change in the assumed health care cost trend rates would have the following effects on the SERP Medical Plan:
 
 
 
 
 
1% Increase
 
1% (Decrease)
  
 
(in millions)
Effect on total service and interest cost components
 
$
 —
 
 
$
 —
 
Effect on accumulated postretirement benefit obligation
 
 
4
 
 
 
(3
) 
In 2014, the Company changed the mortality table used to calculate the present value of pension and postretirement plan liabilities, excluding the SERP Medical Plan. We previously used the RP 2000 mortality table projected with scale AA to 2019 for males and to 2013 for females. In 2014, we used the RP 2000 mortality table with generational projection using scale AA for both males and females. We chose the RP 2000 table because it resulted in the closest match to the Company’s actual experience. For the SERP Medical Plan, the mortality assumption was updated to the RP 2014 table with generational projection using MP 2014.

Plan Assets

During 2014, the target composition of the Company’s U.S. qualified pension plan assets was 58 percent fixed-income securities, 38 percent equity, and 4 percent real estate investment trust. The Company may alter the targets from time to time depending on market conditions and the funding requirements of the pension plan. This current asset allocation is expected to limit volatility with regard to the funded status of the plan, but will result in higher pension expense due to the lower long-term rate of return associated with fixed-income securities. Due to market conditions and other factors, actual asset allocations may vary from the target allocation outlined above.
The Company believes that plan assets are invested in a prudent manner with an objective of providing a total return that, over the long term, provides sufficient assets to fund benefit obligations, taking into account the Company’s expected contributions and the level of risk deemed appropriate.
The Company’s investment strategy seeks to utilize asset classes with differing rates of return, volatility, and correlation in order to reduce risk by providing diversification relative to equities. Diversification within asset classes is also utilized to ensure that there are no significant concentrations of risk in plan assets and to reduce the effect that the return on any single investment may have on the entire portfolio.
The target composition of the Company’s Canadian qualified pension plan assets is 95 percent fixed-income securities and 5 percent equity. The Company believes that plan assets are invested in a prudent manner with the same overall objective and investment strategy as noted above for the U.S. pension plan. The bond portfolio is comprised of government and corporate bonds chosen to match the duration of the pension plan’s benefit payment obligations. This current asset allocation will limit future volatility with regard to the funded status of the plan. This allocation has resulted in higher pension expense due to the lower long-term rate of return associated with fixed-income securities.
The assets related to the Runners Point Group pension plans were not significant.

Valuation of Investments

Significant portions of plan assets are invested in commingled trust funds. These funds are valued at the net asset value of units held by the plan at year end. Stocks traded on U.S. security exchanges are valued at closing market prices on the measurement date.
The fair values of the Company’s U.S. pension plan assets at January 31, 2015 and February 1, 2014 were as follows:
 
 
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
2014
Total
 
2013
Total*
  
 
(in millions)
Cash and cash equivalents
 
$
 —
 
 
$
 1
 
 
$
 —
 
 
$
 1
 
 
$
 —
 
Equity securities:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
U.S. large-cap(1)
 
 
—
 
 
 
102
 
 
 
—
 
 
 
102
 
 
 
101
 
U.S. mid-cap(1)
 
 
—
 
 
 
31
 
 
 
—
 
 
 
31
 
 
 
30
 
International(2)
 
 
—
 
 
 
71
 
 
 
—
 
 
 
71
 
 
 
67
 
Corporate stock(3)
 
 
21
 
 
 
—
 
 
 
—
 
 
 
21
 
 
 
15
 
Fixed-income securities:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Long duration corporate and government bonds(4)
 
 
—
 
 
 
254
 
 
 
—
 
 
 
254
 
 
 
236
 
Intermediate duration corporate and government bonds(5)
 
 
—
 
 
 
110
 
 
 
—
 
 
 
110
 
 
 
105
 
Other types of investments:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Real estate securities(6)
 
 
—
 
 
 
20
 
 
 
—
 
 
 
20
 
 
 
20
 
Insurance contracts
 
 
—
 
 
 
1
 
 
 
—
 
 
 
1
 
 
 
1
 
Other(7)
 
 
—
 
 
 
2
 
 
 
—
 
 
 
2
 
 
 
—
 
Total assets at fair value
 
$
21
 
 
$
592
 
 
$
—
 
 
$
613
 
 
$
575
 
*
Each category of plan assets is classified within the same level of the fair value hierarchy for 2014 and 2013.
(1)
These categories consist of various managed funds that invest primarily in common stocks, as well as other equity securities and a combination of other funds.
(2)
This category comprises three managed funds that invest primarily in international common stocks, as well as other equity securities and a combination of other funds.
(3)
This category consists of the Company’s common stock. The increase from the prior year is due to price appreciation No additional stock was contributed during the year.
(4)
This category consists of various fixed-income funds that invest primarily in long-term bonds, as well as a combination of other funds, that together are designed to exceed the performance of related long-term market indices.
(5)
This category consists of two fixed-income funds that invests primarily in intermediate duration bonds, as well as a combination of other funds, that together are designed to exceed the performance of related indices.
(6)
This category consists of one fund that invests in global real estate securities.
(7)
This category consists primarily of cash related to net pending trade purchases and sales.
No Level 3 assets were held by the U.S. pension plan during 2014 and 2013.
The fair values of the Company’s Canadian pension plan assets at January 31, 2015 and February 1, 2014 were as follows:
 
 
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
2014
Total
 
2013
Total*
  
 
(in millions)
Cash and cash equivalents
 
$
 —
 
 
$
3
 
 
$
 —
 
 
$
3
 
 
$
 —
 
Equity securities:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Canadian and international(1)
 
 
5
 
 
 
—
 
 
 
—
 
 
 
5
 
 
 
5
 
Fixed-income securities:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Cash matched bonds(2)
 
 
—
 
 
 
65
 
 
 
—
 
 
 
65
 
 
 
70
 
Total assets at fair value
 
$
5
 
 
$
68
 
 
$
—
 
 
$
73
 
 
$
75
 
*
Each category of plan assets is classified within the same level of the fair value hierarchy for 2014 and 2013.
(1)
This category comprises one mutual fund that invests primarily in a diverse portfolio of Canadian securities.
(2)
This category consists of fixed-income securities, including strips and coupons, issued or guaranteed by the Government of Canada, provinces or municipalities of Canada including their agencies and crown corporations, as well as other governmental bonds and corporate bonds.
No Level 3 assets were held by the Canadian pension plan during 2014 and 2013.
During 2014, the Company made contributions of $6 million to its Canadian qualified pension plan. The Company continuously evaluates the amount and timing of any future contributions. The Company currently does not expect to contribute to its U.S. or Canadian qualified plans in 2015. Additional contributions will depend on the plan asset performance and other factors. During 2014, the Company also paid $3 million in pension benefits related to its non-qualified pension plans.
Estimated future benefit payments for each of the next five years and the five years thereafter are as follows:
 
 
 
 
 
Pension
Benefits
 
Postretirement
Benefits
  
 
(in millions)
2015
 
$
66
 
 
$
1
 
2016
 
 
55
 
 
 
1
 
2017
 
 
53
 
 
 
1
 
2018
 
 
52
 
 
 
1
 
2019
 
 
53
 
 
 
1
 
2020 – 2024
 
 
232
 
 
 
5
 

Savings Plans

The Company has two qualified savings plans, a 401(k) Plan that is available to employees whose primary place of employment is the U.S., and an 1165(e) Plan that is available to employees whose primary place of employment is in Puerto Rico. Both plans limit participation to employees who have attained at least the age of twenty-one and have completed one year of service consisting of at least 1,000 hours. As of January 1, 2015, the savings plans allow eligible employees to contribute up to 40 percent of their compensation on a pre-tax basis, subject to a maximum of $18,000 for the U.S. plan and $15,000 for the Puerto Rico plan of their compensation on a pre-tax basis. The Company’s matching contribution is an amount equal to 25 percent of employees’ pre-tax contributions up to 25 percent of the first 4 percent of the employees’ compensation (subject to certain limitations). This matching contribution is made with Company stock and such matching contributions are vested incrementally over the first 5 years of participation for both plans. The charge to operations for the Company’s matching contribution was $3 million for all years presented.